The $471 Billion Supply Chain Hole

Even if customers don’t know what they want, they’re sure they want it now, and it looks like the drive toward the on-demand product culture has gotten ahead of retailers.

In a recent report conducted by IHL Group and DynamicAction, analysts found that problems related to overstocking retail storefronts and warehouses result in a collective $471.9 billion lost annually around the globe. While consumers’ expectations have brought about the demand for a data-driven logistics network for express order fulfillment, the report found that serious gaps still remain in the global supply chain.

John Squire, CEO of DynamicAction, explained that retailers must embrace data or sink with their bloated supply chains.

“Consumers are now accustomed to the ‘on-demand’ economy created by Uber, Airbnb, Starbucks’ mobile ordering and Amazon’s same-day delivery,” Squire said in a statement. “Retail is no exception, and the category leaders are those who have their data connected and technology in place to answer customers’ demand for immediacy.”

In detail, the report found that improperly forecasted supply estimates accounted for the largest single area of product loss — $170.2 billion. Product spoilage followed with $80.5 billion, and supplier-side issues comprised half of that with $42.5 billion.

If retailers find themselves mired in supply issues come the start of the holiday shopping season, it may be too late come December to dig themselves out of that hole in time to make it into the black. A report from ShopperTrak projected holiday sales to increase by just 2.4 percent this season, giving merchants even less financial wiggle room to make their heaviest period of the year truly count toward the bottom line.

The race appears to be on for data-driven logistics to save the holidays from going by giftless.